Conservative Mythbusters: People Move Because of High Taxes

One of the popular myths that conservatives like to repeat is that the reason states lose jobs or have other economic turbulence is because business and “job creators” pick up and move to lower tax states. You can’t raise taxes, they say, everyone will leave!

Recent research shows income tax increases cause little or no interstate migration. Perhaps the most carefully designed study to date on this issue concerned the potential migration impact of New Jersey’s 2004 tax increase on filers with incomes exceeding $500,000. It found that while the net out-migration rate of this income group accelerated after the tax increase went into effect, so did the net out-migration rate of filers with incomes between $200,000 and $500,000, and by virtually the same amount. At most, the authors estimated, 70 tax filers earning more than $500,000 might have left New Jersey between 2004 and 2007 because of the tax increase, costing the state an estimated $16.4 million in tax revenue. The revenue gain from the tax increase over those years was an estimated $3.77 billion, meaning that out-migration — if there was any at all — reduced the estimated revenue gain from the tax increase by a mere 0.4 percent.

In fact, states that cut taxes often see more flight than states that maintain a sustainable tax rate. Why? Because taxes are used to provide infrastructure that businesses need to thrive.

Low taxes can prevent a state from maintaining the kinds of high-quality public services that potential migrants value. Studies show that such amenities as cultural facilities, recreational opportunities, and good public services are powerful attractions for potential migrants. Many of those services are financed with tax dollars. Therefore, while low taxes decrease the cost of living, they might also prevent states from preserving or improving valued public services, which would discourage potential migrants.

This is not to say that people never move. They do. Just not for the reasons that conservatives hold faith with.

The research does not, by and large, study the impact of taxes themselves on a household’s decision to migrate, but the insights it provides can help explain why taxes likely are only a minor part of the equation.

Once again, conservatives view the world as completely inverted from the way things really are.

14 Responses to Conservative Mythbusters: People Move Because of High Taxes

Phil, my understanding is that people are leaving high tax states like California and New York in droves and moving to lower tax states like Texas. Am I just a victim of Fox News/WSJ indoctrination or, if true, why would that be so?

The question at hand is whether the migrations are caused by tax rate differences or by other factors. In fact, the case of California is one of housing more than taxes.

California provides one example. A study by the Public Policy Institute of California found that Arizona from 2004 to 2007 was the leading destination for people moving out of California, both for low-income and high-income households. But the median price of a three-bedroom house was more than twice as high in California as in neighboring Arizona in 2007, so by moving to Arizona an average middle-class or upper-middle-income family in California could reduce its annual mortgage costs by 24 percentage points and an upper-middle class family by 15. In some locations, the differentials could be even greater.

That’s huge. If you can move and save 24% on your monthly mortgage costs, that will outweigh any tax variance between the states.

The study does not contain data or research on New York migration, though I expect that migration within a multi-state urban area like New York City (New York, New Jersey, Connecticut) is driven by a very complex melange of factors of which tax rates are but a small part.

So people will move to another state to save money on housing but won’t move to pay lower taxes? Seems rather implausible to me. But hey, now that we know that rates of taxation don’t affect human behavior, perhaps we can now abolish the IRS.

Phil, I’m not being hard on him at all. Common sense dictates that if a conversation is to progress based on a premise, that there must be some agreement that the premise is valid. Just because Denis is happy to proceed on nothing more than what he calls “my understanding” doesn’t mean that there’s a shred of validity to it.

I asked very politely for some justification beyond hearsay of Denis’ claims. I think that’s fair and reasonable. I also think my point about the number of reasons for people to move is not only valid, but important to the topic at hand. If it is true, the reason might be something that none of of us imagined.

I only saw one question there, and it wasn’t too good. I mean, he was dumping all of the burden on you to answer a highly subjective question. That pretty much sums up what’s wrong with Denis’ posts–they place all the burden on everyone except Denis.

Now let’s not get our collective undies in a bundle here. The reason I use terms like “it is my understanding” is because it is accurate and because I don’t have the time or inclination to research every “understanding” that I have. And frankly, neither do you. Of course there are multiple factors that people consider when making the huge decision to move out of state. As such it is quite impossible to pin it on one cause. And, one may easily cherry picking a bit of data here or there to “prove” whatever point one wants. That to me is a rather tiresome game that I don’t care to play. The title of this thread states that it is a myth that people don’t move because of high taxes. I don’t believe that tax rates aren’t a factor in decision making, because if I did I would also have to believe in my tongue in cheek point about the IRS. People do all sorts of things to lower their taxes. They lobby governments for tax exemptions, they hire accountants, they set up businesses to lose money, they fail to report income, etc…. of course they would also move to another location given the right incentives. It is similarly true that taxes aren’t the only thing that matter to people. If we were to be honest with one another, we could probably agree that tax rates have some impact on a decision to move to another state, but we would likely disagree on the degree of impact. There aren’t any studies I can refer to to back up my claim, other than my own lifelong and ongoing study of human nature. So sorry if that offends any of you.

D: ‘The reason I use terms like “it is my understanding” is because it is accurate and because I don’t have the time or inclination to research every “understanding” that I have.’
A: If you “don’t have the time” to check, then you don’t have the time to post. You don’t have the inclination to say anything true, which is your major malfunction here.

D: “And frankly, neither do you.”
A: Denis, you are a liar. The truth is that I do fact check everything that I post. If you were stalking me, you’d know that. But again you’re just sitting in your easy chair, taking pot shots in the dark.

(I’m going to skip the rambling rant for obvious reasons.)

D: “That to me is a rather tiresome game that I don’t care to play.”
A: And yet, here you are.

D: “People … lobby governments for tax exemptions … hire accountants … set up businesses to lose money … fail to report income…”
A. Speak for yourself, Denis. Half of the things you mentioned are felony crimes. All of them are cheats. Your general attitude of tax evasion speaks volumes. You and your political party stand for lying, cheating and stealing, plain and simple.

I’ll be generous and presume that you’re so out of touch with reality, and so isolated from punishment for wrongdoing that you just assumed that everybody tries to steal from honest taxpayers. Well, you assumed wrong.

I do thank you for being so forthcoming about the things that most people would be ashamed to admit, or would cover up for fear of prosecution. Thanks for the insight into how the other 1% thinks.

Memory Man, why so angry? Regarding your allegation of a personal attack, note that I referred to our collective undies, mine included. I tend not to attack myself personally nor was I attacking you. But it sure seems like you are looking for a reason to be angry. What is the point? We have differences of opinion, big deal. Get over it. Differences of opinion and a mature give and take is what I am hoping for here but it seems you might be just a bit too touchy for that to happen. Oh well. Moving on…. my point about tax cheating, lobbying for tax changes etc… should not be interpreted as endorsing or condoning any of these behaviors, rather as proof that people do react to taxes. Of course you knew that as I can tell you are literate. So why would you make up stuff like I have an attitude favorably disposed towards lying, cheating etc… Example, people murder other people. Does stating that fact somehow suggest to you that I favor murder? Really MM, please respond to the things I actually write and stop creating straw man arguments against me. Let’s try to elevate the conversation.

What I find interesting is the number of retired neighbors that continue to stay in their homes intended for their once large families. Downsizing would nearly erase any tax implications for Wisconsin real estate tax. And we have a lower sales tax than many states which would be of greater burden to older folks.

[…] There are more people than I have ever seen before, without anywhere to live, there are many families sleeping in cars, some with small babies this is nearly as bad as The Great Depression . I am disgusted at the leaders of our country making decisions that affect the lives and well being of those who put them in power, but then seem to have little or no regard as to how people are going to survive; Do government leaders really care what is happening ? if they did wouldn't they be listening to, and helping the organizations who are trying to help these families. What about the little guy who is basically on the same wage as as 15years ago but with the bills more than doubling, or those who have worked their whole lives. The ones who have already retired thinking the promised pensions would last them for the later years. For most there was no thing such as super (except for the government workers or those in big corporations) till too late in their lives to make much difference. Most of these people are the ones who have payed high taxes all their working lives and now they are not even making ends meet, it looks like many will never be able to retire, and those who already have, face returning to find work when they are in their 70s plus. Do the politicians care? I don't think so Then bringing in this Carbon Tax, it was stated before the election "there will be NO Carbon Tax " well basically as I see it, it's not going to make one speck of difference except make it harder on those who really can't afford it. It’s all right for the politicians with their hundred thousand dollar weekly pay-packets, and all the lurks and perks they get even after they retire, as well as having the workers of Australia are still paying them, even after they pick up well paying positions in big companies, and how about this report Has our entire system been corrupted by those we appointed to watch over it? What is your view? I seriously wonder how long people will be able to hold out before …/li> […]